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Alcoa puts Alumax in can
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March 9, 1998: 10:35 a.m. ET
The world's premier aluminum packager buys smaller rival for $3.8B
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NEW YORK (CNNfn) - Aluminum Company of America, the world's leading producer of aluminum, has agreed to acquire Alumax Inc., the number-five global producer, for $3.8 billion in a cash-and-stock merger that will create a packaging powerhouse of 100,000 employees in 30 countries.
Pittsburgh, Penn.-based Alcoa provides fabricated and finished aluminum products to customers in industries ranging from automobiles and aerospace to construction and packaging. Alumax does the same, albeit on a slightly smaller scale as the third largest U.S. producer of aluminum.
Under the terms of the deal, which is subject to government review under federal antitrust laws, Alcoa would pay $50 per share in cash for one half of Alumax's 51.6 million outstanding shares. The remaining Alumax shares will be converted into Alcoa common stock. Each Alumax share will be converted into 0.6975 of a share of Alcoa common stock.
The transaction's $3.8 billion valuation is based on the March 4 closing price of Alcoa common stock and includes the assumption of debt.
The combined company will operate in 250 locations in 30 countries and boast estimated revenues in 1998 of about $17 billion.
Allen Born, Alumax's chairman and chief executive officer, said in a statement the merger would help the company save cost overlaps in management, marketing, transportation and research and development "while gaining additional new value through the combined technology and operating know-how of the employees."
The directors of both companies have approved the deal. It will be put to a vote of Alumax stockholders.
The announcement comes at a time of slackening worldwide demand for aluminum. Demand for aluminum, according to industry forecasts Monday, will fall 3.70 percent in Asia in 1998, a reversal from an increase of 3 percent last year, when Asian demand totalled 7.33 million metric, or 8.08 (U.S.) tons.
Latin American growth was expected to ease from 10 percent in 1997, to 6.4 percent this year. North American demand is seen to slow to 2.3 percent, down from 6.1 percent growth in 1997, and European demand growth will likely slump to 2.2 percent, from 6.5 percent in 1997.
World demand, according to figures released by Canada's Alcan Aluminum Monday, was estimated at 28.2 million tons in 1997. Growth in demand is expected to slow to 0.7 percent worldwide in 1998, as compared to 5.4 percent in 1997.
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Alcoa
Alumax Inc.
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